Observations on economics, the academy, the wider world, and things that run on rails.

26.9.13

PARTIAL MONOPSONY BAD, FULL MONOPSONY GOOD?

In The Wall Street Journal, Holman Jenkins considers the unintended political consequences of implementing the so-called Affordable Care Act. The real kicker, though, is the apparent lack of economic thinking on the part of the political class.

ObamaCare also sets in motion long-run forces that could erode the political foundation of Medicare. Don't believe it?

ObamaCare already contains a large implicit subsidy for the old (regardless of income) in the form of protection of pre-existing conditions and its limitation on how much higher rates insurers can charge the old than the young.

Medicare, for its part, is already means-tested and will become more so. Millions of Medicare users already have opted for a private insurance option. How many ObamaCare customers might one day decide they'd also like to keep their private insurance rather than enroll in fee-for-service Medicare—especially as no signal has been clearer from Washington than the signal that Medicare quality will decline as reimbursements to doctors and hospitals are trimmed back?

Yes, and some physicians are limiting their service to Medicare and Medicaid patients already, consistent with the expected response of a supplier to a monopsonist.

But the failure of the Affordable Care Act is supposed to leave voters with the idea that There Is No Alternative to single payer.

It should be noted, finally, who is really rooting for the Affordable Care Act to be a train wreck: It's people on the left, like L.A. Times columnist Michael Hiltzik, who anticipates that "glitches, loopholes and shortcomings" will lead to a single-payer system. It's people like Sen. Harry Reid, whom Mr. Hiltzik quotes telling voters back in Nevada that ObamaCare is "far from having something that's going to work forever."

Yes, and what happens when that Federal Insurance Provider takes sole control of the reimbursement rate to health care providers? Does anybody seriously expect that Wal-Mart-like methods to bend down the cost curves are going to work any better because it's Washington optimizing against the marginal factor cost schedule?